An era ended when the Soviet Unioncollapsed on Dec. 31, 1991.The confrontation between the United States and the Soviet Union defined the Cold War period. The collapse of Europe framed that confrontation. After World War II, the Soviet and American armies occupied Europe. Both towered over the remnants of Europe's forces.

The collapse of the European imperial system, the emergence of new states and a struggle between the Soviets and Americans for domination and influence also defined the confrontation.There were, of course, many other aspects and phases of the confrontation, but in the end, the Cold War was a struggle built on Europe's decline.

Many shifts in the international system accompanied the end of the Cold War.In fact, 1991 was an extraordinary and defining year. The Japanese economic miracle ended. China after Tiananmen Square inherited Japan's place as a rapidly growing, export-based economy, one defined by the continued pre-eminence of the Chinese Communist Party. The Maastricht Treaty was formulated, creating the structure of the subsequent European Union. A vast coalition dominated by the United States reversed the Iraqi invasion of Kuwait.Threethings defined the post-Cold War world.Thefirst was U.S. power. The second was the rise of China as the center of global industrial growth based on low wages. The thirdwas the re-emergence of Europe as a massive, integrated economic power. Meanwhile, Russia, the main remnant of the Soviet Union, reeled while Japan shifted to a dramatically different economic mode.The post-Cold War world had twophases.The firstlasted from Dec. 31, 1991, until Sept. 11, 2001. The secondlasted from 9/11 until now.The initial phase of the post-Cold War world was built on twoassumptions.The firstassumption was that the United States was the dominant political and military power but that such power was less significant than before, since economics was the new focus. The second phase still revolved around the threeGreat Powers -- the United States, China and Europe -- but involved a major shift in the worldview of the United States, which then assumed that pre-eminence included the power to reshape the Islamic world through military action while China and Europe single-mindedly focused on economicmatters.

The Three Pillars of the International System

In this new era,Europe is reeling economically and is divided politically.The idea of Europe codified in Maastricht no longer defines Europe. Like the Japanese economic miracle before it, the Chinese economic miracle is drawing to a close and Beijing is beginning to examine its military options. The United States is withdrawing from Afghanistan and reconsidering the relationship between global pre-eminence and global omnipotence. Nothing is as it was in 1991.Europe primarily defined itself as an economic power, with sovereignty largely retained by its members but shaped by the rule of the European Unión. Europe tried to have it all: economic integration and individual states.But now this untenable idea has reached its end and Europe is fragmenting. Oneregion, including Germany, Austria, the Netherlands and Luxembourg, has low unemployment. The other region on the periphery hashigh or extraordinarily high unemployment.Germany wants to retain the European Union to protect German trade interests and because Berlinproperly fears the political consequences of a fragmented Europe. But as the creditor of last resort, Germany also wants to control the economic behavior of the EU nation-states. Berlin does not want to let off the European states by simply bailing them out. If it bails them out, it must control their budgets.But the member states do not want to cede sovereignty to a German-dominated EU apparatus in exchange for a bailout.In the indebted peripheral region, Cyprus has been treated with particular economic savagery as part of the bailout process. Certainly, the Cypriots acted irresponsibly. But that labelapplies to all of the EU members, including Germany, who created an economic plant so vast that it could not begin to consume what it produces -- making the country utterly dependent on the willingness of others to buy German goods. There are thus many kinds of irresponsibility. How the European Union treats irresponsibility depends upon the power of the nation in question. Cyprus, small and marginal, has been crushed while larger nations receive more favorable treatment despite their own irresponsibility.It has been said by many Europeans that Cyprus should never have beenadmitted to the European Union.That might be true, but it was admitted -- during the time of European hubris when it was felt that mere EU membership would redeem any nation. Now, Europe can no longer afford pride, and it is every nation for itself.Cyprus set the precedent that the weak will be crushed. It serves as a lesson to other weakening nations, a lesson that over time will transform the European idea of integration and sovereignty. The Priceof integration for the weak is high, and all of Europe is weak in some way.In such an environment, sovereignty becomes sanctuary.It is interesting to watch Hungaryignore the European Union as Budapest reconstructs its political system to be more sovereign -- and more authoritarian -- in the wider storm raging around it. Authoritarian nationalism is an old European cure-all, one that is re-emerging, since no one wants to be the next Cyprus.I have already said much about China, having argued for severalyears that China's economy couldn't possibly continue to expand at the same rate. Leaving aside all the specific arguments, extraordinarily rapid growth in an export-oriented economy requires economic health among its customers. It is nice to imagine expanded domestic demand, but in a country as impoverished as China, increasing demand requires revolutionizing life in the interior. China has triedthis many times. It has never worked, and in any case China certainly couldn't make it work in the time needed. Instead, Beijing is maintaining growth by slashing profit margins on exports. What growth exists is neither what it used to be nor anywhere near as profitable. That sort of growth in Japan undermined financial viability as money was lent to companies to continue exporting and employing people -- money that would never be repaid.It is interesting to recall the extravagant claims about the future of Japan in the 1980s. Awestruck by growth rates, Westerners did not see the hollowing out of the financial system as growth rates were sustained by cutting prices and profits. Japan's miracle seemed to be eternal. It wasn't, and neither is China's. And China has a problem that Japan didn't: a billionimpoverished people. Japanexists, but behaves differently than it did before; the same is happening to China.Both Europe and China thought about the world in the post-Cold War period similarly. Each believed that geopolitical questions and even questions of domestic politics could be suppressed and sometimes even ignored. They believed this because they both thought they had entered a period of permanent prosperity. 1991-2008 was in fact a period of extraordinary prosperity, one that both Europe and China simply assumed would never end and one whose prosperity would moot geopolitics and politics.Periods of prosperity, of course, always alternate with periods of austerity, and now history has caught up with Europe and China.Europe, which had wanted union and sovereignty, is confronting the political realities of EU unwillingness to make the fundamental and difficult decisions on what union really meant. For its part, China wanted to have a free market and a communist regime in a region it would dominate economically. Its economic climax has left it with the question of whether the regime can survive in an uncontrolled economy, and what its regional power would look like if it weren't prosperous.And the United States has emerged from the post-Cold War period with one towering lesson: However attractive military intervention is, it always looks easier at the beginning than at the end.The greatest military power in the world has the ability to defeat armies. But it is far more difficult to reshape societies in America's image. A Great Power manages the routine matters of the worldnot through military intervention, but through manipulating the balance of power.The issue is not that America is in decline.Rather, it is that even with the power the United States had in 2001, it could not impose its political will -- even though it had the power to disrupt and destroy regimes -- unless it was prepared to commit all of its power and treasure to transforming a country like Afghanistan. And that is a high price to pay for Afghan democracy.The United States has emerged into the new period with what is still the largest economy in the world with the fewest economic problems of the threepillars of the post-Cold War world. It has also emerged with the greatest militarypower. But it has emerged far moremature and cautious than it entered the period. There are new phases in history, but not new world orders. Economies rise and fall, there are limits to the greatest military power and a Great Power needs prudence in both lending and invading.

A New Era Begins

Erasunfold in strange ways until you suddenly realize they are over. For example, the Cold War era meandered for decades, during which U.S.-Soviet detentes or the end of the Vietnam War could have seemed to signal the end of the era itself. Now, we are at a point where the post-Cold War model no longer explains the behavior of the world. We are thus entering a new era. I don't have a good buzzword for the phase we're entering, since most periods are given a label in hindsight. (The interwar period, for example, got a name only after there was another war to bracket it.) But already there are several defining characteristics to this era we can identify.First, the United States remains the world's dominant power in all dimensions. It will act with caution, however, recognizing the crucial difference between pre-eminence and omnipotence.Second, Europe is returning to its normal condition of multiple competing nation-states. While Germany will dream of a Europe in which it can write the budgets of lesser states, the EU nation-states will look at Cyprus and choose default before losing sovereignty.Third, Russia is re-emerging. As the European Peninsula fragments, the Russians will do what they always do: fish in muddy waters. Russia is giving preferential terms for natural gas imports to some countries, buying metallurgical facilities in Hungary and Poland, and buying rail terminals in Slovakia. Russia has always been economically dysfunctional yet wielded outsized influence -- recall the Cold War. The deals they are making, of which this is a small sample, are not in their economic interests, but they increase Moscow's political influence substantially.Fourth, China is becoming self-absorbed in trying to manage its new economic realities.Aligning the Communist Party with lower growth rates is not easy. The Party's reason for being is prosperity. Without prosperity, it has little to offer beyond a much more authoritarian state.And fifth, a host of new countries will emerge to supplement China as the world's low-wage, high-growth epicenter. Latin America, Africa and less-developed parts of Southeast Asia are all emerging as contenders.

Relativity in the Balance of Power

There is a paradox in all of this.While the United States has committed many errors, the fragmentation of Europe and the weakening of China mean the United States emerges more powerful, since power is relative. It was said that the post-Cold War world was America's time of dominance. I would argue that it was the preface of U.S. dominance. Its twogreat counterbalances are losing their ability to counter U.S. power because they mistakenly believed that real power was economic power. The United States had combined power -- economic, political and military -- and that allowed it to maintain its overall power when economic power faltered.A fragmented Europe has no chance at balancing the United States.And while China is reaching for military power, it will take many years to produce the kind of power that is global, and it can do soonly if its economy allows it to. The United States defeated the Soviet Union in the Cold War because of its balanced power.Europe and China defeated themselves because they placed all their chips on economics. And now we enter the new era.

The inflationary challenges of the 1970s created a touchstone for the generation of senior central bankers that oversaw monetary policy across the OECD from the 1980s onwards. The orthodoxy that emerged was characterised by money targeting, development of maximum inflation policies, central bank independence and an environment in which countercyclical monetary policy (known as “leaning against the wind”) was anathema but where erring on the side of caution translated into attempting to be “ahead of the curve” by anticipating inflation.Since 2007, though, we have seen a generational and regime change at OECD central banks, and the old orthodoxy has given way to a new set of norms.Whereas central bank balance sheets within the OECD were broadly stable in the decadesbefore 2007, they have since exploded.The Bank of England’s has expanded by about500 per cent, the US Federal Reserve’s by 380 per cent, while the formerly much more conservative European Central Bank follows not far behind at 250 per cent. Despite protestations that this expansion can be sterilised and has not yet led to expansion of broad money aggregates because of the collapse of velocity, this probably relegates money targeting to the dustbin of history.Central bank independence, once so important, is now being subtly but perceptibly eroded as governments find their fiscal room for manoeuvre increasingly constrained.The old division between the organs of monetary and fiscal policy is starting to blur.This is visible in both the explicit financing of government debt and in the greater receptiveness towards central banks “leaning against the wind”, an approach previously frownedupon as beyond the scope of monetary policy.Meanwhile, maximum inflationtargets are being adjusted upwards and minimum inflation levels set.The former is on the cards in the UK while Japan has introduced the latter as it looks to finally extricate itself from the economic doldrums. Consequently, erring on the side of caution now meanscentral bankers being reactive rather than proactive on the inflation front – or behind, not ahead, of the curve.The emergence of this new orthodoxy has a number of significant implications for investors.While inflation expectations look well anchored for the next18 months, the medium-term consequences of central bankswillingly being behind the curve would be a pick-up in broader measures of money supply as velocity recovers, and rising inflation expectations.Already in the past decade, inflation has surprised on the upside, with G7 inflation systematically underestimated by consensus. Rising inflation expectations will make sovereign bonds at their current, artificially subdued yields even less attractive to investors, intensifying financial repression as a means to silently de-lever.This can only raise the spectre of a big bond market correction and encourage investors to look elsewhere for positive real returns. In this type of economic environment, with low but rising inflation rates, equities have historically outperformed bonds.The prospect of inflation expectations catching up with reality will also affect wages and, by extension, equity sector valuations. Except for the periods after the dotcom bubble and bust and the financial crisis, employee salary costs as a proportion of net corporate productivity in the US have been trending downwards since 1980. Based on a historic correlation between this metric and consumer inflation, we can expect a reversal of this trend as wage growth responds to higher inflation expectations. This could become an increasingly important factor for the valuation of labour-intensive businesses.All other things being equal, we can also infer from the new orthodoxy an impact on currency movements, and in particular on real exchange rates.Aside from the day-to-day oscillations, the real trade-weighted progression of major currencies since 2007 is highly correlated to the expansion of central bank balance sheets, with sterling weakest and the yen the strongest. The aggressive quantitative easing policies across most of the OECD have had the effect of bringing a much swifter (downward) adjustment of real exchange rates relative to emerging economies.Seen in this light, rather than partaking in a currency war, Japan is now (belatedly) falling into line with other developed economies to halt and ultimately reverse the ever appreciating yen.This is part of an important rebalancing of the global economy and supports the continued appreciation of emerging markets currencies, notably the renminbi, over the comingdecade.Andreas Utermann is co-head and global chief investment officer at Allianz Global Investors.

NEW YORK – The surest bet on the future of energy is the need for low-carbon energy supplies.Around 80% of the world’s primary energy today is carbon based: coal, oil, and gas. We will need to shift to no- or low-carbon energy by mid-century. The big questions are how and when.

There are three compelling reasons for the world to make the shift to low-carbon energy. First, higher levels of CO2 are making the world’s oceans acidic. If we continue with business as usual, we will end up destroying a vast amount of marine life, severely damaging the food chains on which we rely.

Second, CO2 is dangerously changing the world’s climate, even if many Big Oil interests would have us believe otherwise.(So, too, did the tobacco companies spend vast sums on political lobbying and bogus science to deny the links between smoking and lung cancer.)

Third, we face steeply rising prices for fossil fuels, as developing countries’ growthdrives up demand and conventional supplies of coal, oil, and gas are depleted.Sure, we can find more fossil fuels, but at much higher cost and at much greater environmental risk from industrial spills, waste products, leaks, and other damage.

Even the much-heralded shale-gas revolution is a lot of hype – similar to the gold rushes and stock bubbles of the past. Shale-gas wells deplete far more rapidly than conventional fields do. And they are environmentally dirty to boot.

The United States has developed many new low-carbon energy technologies, but other countries are currently far more intent, far-sighted, and decisive than the US to put these technologies to large-scale use.Politically, America is still the land of Big Oil. Americans are bombarded by industry-funded media downplayingclimate change, while countries that are much poorer in fossil fuels are already making the necessary transition to a low-carbon future.

Twoneighbors in Europe, Germany and France, are showing the way forward – or, more precisely, the alternative ways forward – to a low-carbon future. They are going about it in ways that reflect their different resource endowments, industrial histories, and political pressures.

Germany is undertaking the Energiewende, or transition to sustainable energy – a remarkable effort (indeed, unprecedented for a large advanced economy) to meet the country’s entire energy demand with renewable energy, especially solar and wind power.Meanwhile, France relies heavily on low-carbon nuclear power, and is switching rapidly to electric vehicles, such as the pioneering Renault-Nissan Leaf.

Of the twoapproaches, Germany’s is the more unusual bet.After Japan’s nuclear disaster at Fukushima, Germany decided to shut down its entire nuclear power industry and shift entirely to a strategy based on greater energy efficiency (lower energy input per unit of national income) and renewables. There really is no clear roadmap for such a huge energy transformation, and Germany almost surely will need to rely on a European-wide electricity grid to share clean energy, and eventually on imported solar power from North Africa and the Middle East.

France’s bet on nuclear power is a more proven option.After all, most of France’s electricity has come from nuclear power for many years. And, though anti-nuclear sentiment is very strong in Europe – and, increasingly, even in France – nuclear power will remain part of the global energy mix for decades to come, simply because much of Asia (including China, India, South Korea, and Japan) will remain major users of it.

The key point is that France and Germany, and many other European countries – including the Scandinavian countries, with their considerable wind and hydropower potential – are all recognizing that the world as a whole will have to move away from a fossil-fuel-based energy system. That is the right calculation.

Many will no doubt argue about which alternative – France’s bet on nuclear power or Germany’s solar pathway – is wiser.But both strategies are probably correct. Most studies show that deep de-carbonization of the world economy from now to mid-century, a time horizon mandated by environmental realities, will require that all low-carbon options – including greater efficiency and renewables – be scaled up massively.

One of the highest priorities of the new Sustainable Development Solutions Network, which I direct on behalf of United Nations Secretary-General Ban Ki-moon, will be to elaborate alternative pathways to a low-carbon economy, taking into account the specific conditions of countries around the world.Different countries will choose different strategies, but we will all need to get to the same place: a new energy systembuilt on low-carbon sources, electrification of vehicles, and smart, energy-efficient buildings and cities.

Early movers may pay a slightly higher price today for these strategies, but they and the world will reap long-term economic and environmental benefits.By embracing truly sustainable technologies, France, Germany, and others are creating the energy system that will increasingly support the world economy throughout this century.Jeffrey D. Sachs, Professor of Sustainable Development, Professor of Health Policy and Management, and Director of the Earth Institute at Columbia University, is also Special Adviser to the United Nations Secretary-General on the Millennium Development Goals. His books include The End of Poverty and Common Wealth.

We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.